Aptargroup Inc (ATR) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's second quarter 2010 results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

Introducing today's conference call is Mr. Ralph Poltermann, Executive Vice President and Treasurer of AptarGroup. Please go ahead, sir.

Thank you, Dmitri. Before we begin, I would like to point out that the discussion to follow includes some forward-looking comments, and actual results or outcomes could differ materially from those projected or contained in the forward-looking statements. To review important factors that could cause actual results to differ materially from those projected or contained in the forward-looking statements, please refer to AptarGroup's SEC filings.

The information on this conference call is relevant on the date of this live call. Although the Company will post a replay of this conference call on its website as a service to those investors who are not able to listen today, information contained in the replay will be dated and to be used for background information only. The Company undertakes no obligation to update material changes in forward-looking information contained therein.

Participating on the call today are Peter Pfeiffer, President and Chief Executive Officer of AptarGroup; Steve Hagge, Executive Vice President and Chief Operating Officer; and Bob Kuhn, Executive Vice President and Chief Financial Officer.

I would now like to turn the conference over to Peter.

Thank you, Ralph. Good morning, everyone. I will comment on our overall results, an outlook, and then discuss our Beauty & Home segments. Steve will follow me with his comments on our Closures and Pharma segments, and Bob then will review our financials.

Focusing specifically on the quarter overall, this was an exceptionally strong quarter for us. The positive demand trends that we saw in both our Beauty & Home and Closures segments during the first quarter of 2010 continued into the second quarter of this year. Also, increased pharma demand led to a strong core growth for the Pharma segment in the quarter. The improvement in cross sales more than offset the adverse translation effect from weaker euros.

Increased volumes allowed better utilization of our facilities and this, in conjunction with our continued focus on cost control, led to our highest-ever quarterly earnings per share. Across-the-board income for every segment increased over the prior year.

Looking forward, overall, our outlook for the third quarter is positive. There is a lot of new project activity. In light of this, as mentioned in our press release, we will be increasing our capital expenditures this year, particularly for the food and beverage markets.

I would like to take a moment to briefly discuss the announcement increasing our dividend. The Board approved a 20% increase in the annual dividend rate for $0.60 per share to $0.72 per share. Our cash generating ability and strong balance sheet allowed us to improve shareholder value with this action. And we continue to be well-positioned to take advantages of strategic opportunities in the future.

Turning now to some specifics on our Beauty & Home segment performance. We saw improvement in both sales and income for the Beauty & Home segment in the quarter. Compared to the prior year, reported sales increased 23%. Changes in exchange rates negatively affected the translation of sales by 3%; excluding currency changes, sales increased 26%.

Demand from all three of the primary markets served by the Beauty & Home segment increased during the quarter. Excluding changes in exchange rates, sales to the fragrance cosmetic markets increased 30%. Sales to the personal care market increased 23% and sales to the household market increased 25%.

Turning to products, we introduced an innovative atomizer that revives the elegance and tradition of fragrance atomizers that use rubber bulbs. It is a patented system that is the first no-leak bulb atomizer.

Interest in packaging differentiation and consumer convenience is growing in the household markets. An example of this is that our locking actuators, which eliminates the need for overcaps, were introduced on two automotive products by Turtle Wax. One product is a tire cleaner and the other one is an interior stain and softer spot lifter.

I would like now to turn the call over to Steve.

Thanks, Peter, and good morning, everyone. I'll provide my comments on the Closure and Pharma segments, and then turn the call over to Bob to review our financial results.

First, looking at the Closures segment, compared to the prior year, reported sales in the quarter increased 19%. Changes in exchange rates negatively impacted sales by about 1%; and therefore, excluding currency changes, core sales increased by 20%. The pass-through of higher resin cost accounted for about 7% of the sales increase. A decrease in the sales of custom tooling to the food market was offset by an increase in custom tooling sales to the personal care market, resulting in overall custom tooling sales being roughly flat in the quarter.

Excluding currency changes, sales to the personal care market increased 22%, with core sales to the personal care market up around 19%, excluding the tooling sales increase. Again, excluding currency changes, sales to the food and beverage market was up 10%, with core sales to the food and beverage market, excluding custom tooling sales, were up 16%. Segment income from both an absolute dollar amount and as a percentage of sales standpoint increased from the prior year.

Now turning to some new products. One of our custom closures is used on Neutrogena's Deep Clean Sport line, which includes a body wash and a facial cleanser. The portable leak-proof package is durable and can be easily used for travel. We've also introduced a new ribbon-tipped silicone valving system that offers a new level of luxury for direct to skin applications. It has a wider dispensing area than our original pinpoint dispensing system, which has been used on several recent launches.

Now looking at our Pharma segment, reported sales increased 8%. Excluding a 5% negative impact on exchange rates on translation, core sales increased by 13% in the quarter. Higher custom tooling sales accounted for about 1% of the increase and the remainder of the increase was primarily due to very strong sales of our metered dose valves.

Now looking at some new products in the Pharma sector, GW Pharmaceuticals has introduced a cannabis-based medication, using one of our pumps. This has been approved in the UK for treating multiple sclerosis. In addition, the FDA has approved a nasal spray form of medication from Roxro Pharma that uses one of our pumps. This is a pain medication for use outside of the hospital for relief of moderate to moderately severe pain. This medication was designed to minimize the potential negative side effects associated with some of the other pain relievers.

Now I'll turn it over to Bob to discuss the financials.

Thank you, Steve, and good morning, everyone. I will provide my financial comments, and then Peter, Steve and I will be happy to answer your questions.

First, commenting on our consolidated results for the quarter. As you have seen, our overall reported sales increased 19%. Changes in currency rates negatively impacted reported sales by approximately 3%. As a result, excluding currency changes, sales increased 22% in the quarter.

From a geographic standpoint, sales to customers by our European operations represented approximately 56% of net sales compared to 57% last year, while sales to customers by our US operations accounted for 30% of sales versus 29% last year.

Reported diluted earnings per share increased to an all-time high of $0.67 per share compared to the $0.41 per share reported in the prior year, or $0.44 per share, excluding the reorganization charges recorded last year in the second quarter.

Free cash flow, which we define as cash flow from operations less capital expenditures, was roughly $35 million for the quarter versus $53 million in the prior year. Our cash flow from operations for the quarter was approximately $65 million compared to about $90 million in the prior year, and capital expenditures were approximately $30 million in the quarter compared to $37 million in the same quarter of last year.

During the quarter, we spent approximately $25 million to buy back approximately 602,000 of our shares, and our repurchase authorization at the end of the quarter was approximately 2.9 million shares.

You will see on our balance sheet that the amount of both cash and debt at the end of the second quarter decreased from the prior quarter-end. This is due to a $80 million dividend from our European operations in the quarter that we used to reduce short-term borrowings in the US. The mix of debt at the end of the quarter is now roughly 70% fixed versus 30% variable, and the average interest rate is around 4.5%. On a gross basis, debt to capital is about 20%, while on a net basis, it is only 4%.

Briefly taking a look at the first six months, reported sales increased approximately 18% and changes in exchange rates accounted for 2% of the increase, resulting in an organic sales increase of about 16%. Reported diluted earnings per share year-to-date increased to $1.22 per share versus $0.79 per share reported last year, or $0.82 per share, excluding the reorganization charges I mentioned earlier.

Looking forward, as Peter mentioned, we plan to increase our capital expenditures this year due to the success we've had with some new projects, primarily in the food and beverage area. Presently, we expect depreciation and amortization for all of 2010 to be in the area of $135 million, with capital expenditures expected to be approximately $140 million. I would like to remind you that these amounts could vary, depending upon changes in exchange rates.

The effective tax rate for the full year 2010 is expected to be in the range of 32% to 33%. And lastly, we currently estimate that diluted earnings per share for the third quarter of 2010 will be in the range of $0.61 to $0.66 per share, compared to the $0.48 per share reported in the prior year, or $0.51 per share in the prior year if you exclude reorganization charges.

At this point, Peter, Steve and I will be glad to answer any of your questions.

(Operator Instructions). Ghansham Panjabi.

Could you touch on whether resin was unfavorable in the quarter? And can you kind of break it down by business unit, if so?

Yes, resin for us was unfavorable, particularly as we saw larger increases in the United States. So I'd estimate that it's about $2.5 million to $3 million negative impact on the quarter. In terms of the catch-up on the resin pass-through, that primarily relates to the Closures segment, but there is some impact also on the Beauty & Home and Pharma segments, but it's less -- and, again, as you know, Ghansham, prices seem to be going down, so we would anticipate that in the US, some of those increases will be reducing as we go in through the third quarter.

Okay. So just based on that and looking through numbers over the years on a quarterly basis, it looks like 3Q EPS is usually in line to slightly higher than 2Q, and as you just mentioned, resin is probably going to be a sequential tailwind for you. I'm just curious on why guidance for 3Q is a little bit lower from where you reported 2Q.

The primary reasons for us, Ghansham, is the exchange rate assumptions that we've got baked in there. Consistent with the way we've always done our projections, we use the exchange rate at the time we do the projection. And in this case, it was about 1.22 euro to dollar rate.

That's the assumption you're using?

That's correct.

And what did it average in the second quarter?

1.27.

Okay, great. Thanks so much.

Claudia Hueston, JPMorgan.

I just had a couple of questions. And one, I just curious if you could provide any color on where you think underlying demand is, versus what was the end of destocking in terms of your markets, and maybe where that impact was most significant?

And then I was curious if you're seeing any difference in attitudes from US versus European customers.

So, our view of the market growth now is basically because of stopping of the destocking, so we'll have -- we have not seen a destocking. We are seeing that our customers have a better sell-through, so we are seeing some market growth and we are also seeing some changes in the products scope we are selling. So it's basically the two things is coming back to the levels of sales of 2008 and, yes, that's basically it.

Talking about Europe and America, we are seeing some growth in Europe. There is a lot of talking about the dollar -- the euro weakness in the last month. The European market is somehow split. You have countries like Italy and France, which are pretty flat; on the other hand, you are seeing some growth, economic growth, in Germany, which is profiting from the low euro rate. And we are seeing a decline in unemployment. Germany today has the lowest unemployment rate in the last 18 years. So this is also increasing the demand for our products.

Okay, that's helpful. Thanks very much. And then just -- you had commented, I think, in the press release and in the prepared remarks about the benefit of some of your cost reduction efforts over the last year or so, and your ability to maybe react more quickly during this period of recovery.

I was wondering, are you seeing any difference in terms of your share? Do you think you're gaining some share in the current environment?

I think for the time being we are pretty sure that we are at least holding our market share; maybe in one of the other customers, we are increasing our market share.

Okay, thanks very much.

Chris Manuel, KeyBank.

A couple of questions for you. First, you mentioned new product development specifically in the release and then in prepared comments. And you talked, I think, mostly about food and bev. Could you maybe give us a little color on some of the things that you're doing in food and bev? And then what other types of new product development you're doing on your own that you think might bear some fruit in the next, let's call it, six to 12 months?

I'll take the food and beverage side. Again, we've got several projects with several major food and beverage customers today. A couple of these projects are using the technology that we acquired at the end of the first quarter. If you remember, we acquired some technology that relates to basically taking aluminum foil and bonding it onto a plastic bottle. That we're using on several major projects for us.

So what we're seeing is, with our added focus on the food and beverage side, a lot of different projects growing there. Some of those will be coming to market as we get into particularly early 2011. So, again, we're seeing some very good growth in that marketplace.

In terms of the other products, we're seeing continued emphasis on our products and coming up with new products, modifications that we saw early this year that will be going to market in the second half. So again, I think a continual emphasis by our customers on new product introduction, ability to differentiate in the marketplace.

And then my follow-up is on the Pharma side, that business last year, when most of your other segments had fallen off, stayed relatively steady. And as the other units picked up, it looked like Pharma really took a jump this quarter. I know you cited metered dose, but that -- it just seems like an awfully big jump. Is there any new product pipeline selling or new launches or anything of that type of thing that's happened that may have driven all that?

Well, no, I think it's really across the board. I mean, while our metered valves were definitely one of the stronger drivers to that, we had good sales of our pumps into the marketplace. So what we're seeing is, if you remember a year ago, we were starting to see some weakness in some of the Eastern European markets and also some of the developing markets. Those have started to recover and we're starting to see some growth there.

So, Pharma has always been difficult to get a steady growth. It tends to be a bit more choppy. But we're optimistic that we're back to kind of the growth levels that we've seen in the past.

Okay. Thank you, guys.

George Staphos, Bank of America.

You might have mentioned it on some of the other Q&A, we just got back on, but are there any areas geographically that are any -- that are relatively weak for you at this juncture or have weakened since the first quarter?

George, we are seeing the growth across the board. Thus, there are no special geographic areas which are doing better or worse, so the growth for the third -- for the second quarter was really across the board, across all products.

Okay. Second question, could you go back through your new products, in particular, within Pharma? And I realize Aptar is a company more of singles and doubles, but are there any that you're particularly more positive or optimistic on?

I think there's two things, George, that I would come back to, to give you -- I don't think there's any one product. But I guess one of the areas that we continue to see excellent growth in has been generics, generic medication here in the United States. So as a class of products, that has continued to grow for us.

Secondly, while it hasn't been big volume, one of the areas we continue to be very optimistic about has been the introduction of new pain medications being done either nasally or through one of the metered dose systems.

And then the third area for us is one that we haven't seen actually having major introductions, but we expect coming forward, is in the ophthalmology area -- well, you know, eye medications. So, I guess the one broad area that we're seeing growth would be generics here in the US. And then the last area would have been developing markets continue to grow nicely for us.

Okay. And those pain medications, could you go back through them again and what you're doing that's unique within the customers' value proposition? Thanks very much.

Well, I think the key issue for that is that it's actually going away from either a pill or a syringe. So it's opening up a whole new therapy side. So these medications are being done for either acute pains or moderate pains, and they're done through the nasal route most of the time. And it gives the ability to get the patient back down to a steady base much quicker than they were through the other medication forms. So we're working on several other new projects in that area that we hope will be coming to market in the near future.

Alright, I'll turn it over. Thanks.

Chip Dillon, Credit Suisse.

First question is just to make sure we have the right relationship here on the euro. You mentioned that you were using 1.22. Could you just refresh our memories? Is there a rough rule of thumb, either for operating income or even EPS that you would use in terms of sensitivity to a, say, a penny change in the euro?

Chip, what we typically would say is if you take the changes quarter-to-quarter in the euro, about 60% of our business is euro-based. So, just for example, let's just assume that the euro stayed at 1.22 in the third quarter. Last year, it was about 1.43. So that would be about 15% weaker euro quarter-to-quarter. If you take 16 -- you take [60%] of that, you'd be in the 9% to 10% range on the top line. Now that's offset somewhat on the bottom line or on the EPS side by the positive transaction effect we'll have on imported components and finished goods from Europe, both in the United States and Latin America. So that the final number will be something slightly less than that.

But I would caution, it's a tough number to actually model out because this quarter, we also saw 15.5% strengthening of the real. And as our business continues to grow in Latin America, that's also offsetting some of that euro impact. So it's very difficult to model, but certainly, the bottom-line impact is less than what the top-line impact is on the translation side.

Okay, that's very helpful. And then you mentioned the capital spending is edging up, although it's really nowhere near where it was, say, in 2008. Can you talk a little bit about it? Because I was just noting how your volumes this quarter were significantly better than they were in the same quarter of '08, which I think is a better comparison, especially in -- even in Closures.

Do you see opportunities to -- that would make organic growth more attractive that might lead us to see even a further ramp-up in Capex, especially next year?

Well, I think, first of all, Chip, if you go back to '08 and you strip out currency, we're basically getting back to '08 levels. So we're not significantly above the '08 levels ex-currency. So Closures is a little more difficult because within the Closures, remember you have the resin pass-through, which causes a bit more of noise in that number.

(multiple speakers) Right, resins were way up that year. I'm sorry, you're right, this is revenues.

Yes, and again, that's why I'm saying -- so when we look at our volumes, we are up volume-wise on the Closures side of the business; but on our Beauty & Home sector, for example, we're pretty much back to the '08 levels. So as we look going forward, the good news is if volumes continue to increase, we will be adding capacity. But right now, we feel we have, with the capital that we'll be employing, in pretty good shape as we go into 2011.

Okay. And the last follow-up is, some of your competitors -- and only a few have reported -- but have talked about ramping up share repurchases and, in fact, even favoring them over dividends. And not to complain about a 20% dividend increase, that's very nice, but do you have thoughts about buybacks and whether there's, either for tax reasons or just given your balance sheet, you might step on the gas a little bit on that as we go into 2011?

Well, I think if you look at our cash flow, I mean, like you said, when we take a look at our free cash flow in terms of usage, we still look at acquisitions as being our priority and that's an area we continue to evaluate. As you said, the dividend increase for us was significant this quarter with a 20% increase.

We also think the number of shares we repurchased were higher in the second quarter than they were the first, and we would continue to be kind of at that pace or about a 2 million share repurchase pace per year. And then the other side is, again, what we're seeing is good growth in our core markets, as we talked about, even while it's not huge numbers, we're reinvesting back into food and beverage and some of our other markets, which are hopefully going to be driving some of that internal core growth back up to that upper single-digit level.

Got you. Thank you.

Meggan Friedman, William Blair.

A couple of questions. The first is, can you provide some color on how volume trended over the quarter? You talked about continued momentum from Q1. Did volume trends improve off of that, with June stronger than April?

You know, generally, we've don't comment on month-to-month but overall, I would say it was pretty consistent throughout the full second quarter. We didn't see one month particularly trending in any one direction.

The only thing to that, though, Meggan, keep in mind, in Europe in particular, May has a lot of holidays. So you get which I call seasonal variability as opposed to business-based. But other than that, it's pretty consistent.

Okay, great. Thank you. And then a follow-up on the discussion of new product development trends. Can you talk a little bit about any differences that you're seeing in terms of demand between branded and private label manufacturers?

I think that there is still the same relationship between private label and branded products. During the crisis, more and more customers are going to private label products. It seems that some of them are coming back to the branded products because there is more income available and the economy is improving. So -- but these are minor shifts during the last quarter, I would say.

And in terms of their new product development efforts, in particular, are you seeing one versus another stronger with you?

We are seeing quite a bit of new product introductions in the branded area, so people are visibly preparing their Christmas business. So this is a common trend across the board. The brand -- the private label introductions are more spread throughout the year, so it's not so much linked to special events.

Okay, thank you. And then just one housekeeping question. Can you provide what the share count was at the end of the quarter?

I believe it was around 67 million outstanding. Yes.

Okay, great. Thank you.

David Woodyatt, Keeley Asset Management.

Yes, your comment in the press release about the absence of inventory destocking, and I think you commented earlier on this a little bit, but wondering if you could give us a little more color on to what degree you think these very strong sales were impacted by restocking? And also, what is your understanding of your customers' current inventory position? Do they still need to do some further restocking?

For the time being, as I already mentioned, the destocking process has come to an end. What we are seeing is that our customers are reacting under the demand from the markets, so this is really demand from the market. We are not seeing any kind of destocking, because I think they are doing the same as we do, they are still pretty cautious because of the uncertainties of the development of the market. So, for the time being, it's basically customer demand, final customer demand, which is triggering the increase of the sales.

Okay, thanks.

Brian Rafn, Morgan Dempsey.

A question for you, and I missed your opening comments, your organic sales, how much -- are you beginning to capture any pricing inflation or is it all primarily being driven by unit volume?

The majority of it is primarily the unit volume. On the pricing side, we do get about a 1% to 2% impact coming from the closures -- higher resin in the quarter and that's passed through. So that's what I would say is primarily volume-driven.

And what I think on the Closures -- keep in mind, on Closures is a separate segment, of their growth, about 7% of that related to the resin pass-through. So what Bob was talking about was overall Aptar.

Okay. In the personal care area, to some degree, may be lesser in the food and beverage, the whole reformulation of packaging where you have the manufacturer keeping the same price but instead of 16 ounces, now you get 12; the ergonomics of the bottles are the same, same color. How much of that reduction in size are you seeing in packaging reformulation?

Brian, this is very difficult for us to predict and to realize. We do not get detailed information from our customers. The size of the closures and the pumps are the same for the 12 ounce as they are for the 10 ounce, so we are not able to say where these products, our products are going on.

Okay. I asked you in the past, we're seeing, certainly, in -- and again, I think it's probably more the personal care hygiene area in the soaps, dispensers -- you're seeing more and more of these electronic dispensers that have an electronic eye, be it libraries, hotel motel type. Is your dollar content in an electronic -- and I think Peter said in the last conference call that we do participate in that in Aptar. What is your dollar content in an electronic dispenser versus something that might be the old manual pump?

I think if you look at it, our dollar content is probably slightly higher in some of those packages but it is not substantive. So, I mean, we're still selling the pump for $0.10 to $0.20 and we may be selling a product in that thing for $0.30 to $0.40. So it's not a huge difference.

Now, if we get into the electronics, it's a very different game if we're selling the electronics around that.

Okay. So I'm going to ask you, Steve, is that something you'd be interested in on an M&A basis or --?

We continue to look at all sorts, Brian, on the M&A. I mean, in terms of packaging differentiation to intellectual property and what have you.

Sure. Is the electronic pump, is that an area that you're seeing rapid growth when you're looking at? Or do you not really understand where that pump is really going?

Today, it's been largely commercial. We're doing some of that on the household, so I wouldn't call it taking over the market, but there's been nice growth too.

Okay. What did you guys -- and I missed your opening comments -- relative to set up for Christmas 2010 and maybe the perfume and cosmetic area, what are you seeing on forward purchasing and forward design changes, new product launches, any -- at this juncture, are you seeing any visibility?

For the time being, it's very difficult to say. The sales for Christmas business just has started in June, July, and will continue till September, so it's very difficult to say how much this will be and how our customers are seeing these Christmas sales.

Okay.

Brian, I think at this point, we're going to probably cut you off a little bit, have you get back in line, and take some other questions from the rest of the group (multiple speakers).

Okay, thanks.

Mike Hamilton, RBC.

Congratulations. I was wondering if you could -- if there any thoughts worth noting on the Capex in terms of major projects that are out there back half of the year?

I would say overall, the Capex is evenly kind of spread out throughout the year. And you have to remember that some of the new projects that we're talking about, as Steve mentioned, really won't begin to materialize until the first quarter at the earliest in 2011. So, it's a long period in terms of the mold builds and the machine builds and things like that. But I would say there's nothing particularly out of line in terms of quarter-to-quarter.

And certainly with the customer projects, we can't comment until they get to market.

Right. Steve, you touch briefly on acquisition. What's your sense of pipeline and pricing feelings on seller's part and what are you sensing out there?

I think the seller's pricing is becoming, I guess, more in line to where the market pricing was. You do see volatility. I think in the US -- and again, this is more of a personal opinion then -- that some of the changes that we're seeing out there in terms of tax changes, et cetera, may end up driving some US issues, particularly as we get after September, when people get back from the vacation period. But overall, I would say that the market is becoming realistic -- more realistic on pricing and there are still opportunities available.

Thank you very much.

Jason Rodgers, Great Lakes Review.

Looking at the FX impact, what was it on SG&A in the quarter?

I don't have that in front of me, but I mean, again, I think if you use the rough 3% on the sales side, it's not that far from that if you go all the way down to the SG&A side. The translation for us is really a pro rata throughout, so rough numbers, I would go with 3%.

Okay. And then has there been any type of tightness as far as your raw material supplies? Being able to --?

We are seeing some -- after the crisis or during the crisis, many of our suppliers have cut down their capacities. And we are seeing some shortage in some of the components we are selling, especially in the metal supply area. There are starting to build up again, the capacity, so they really improved in the first of the year.

Okay. And then finally, what is the status of the ERP system you're putting in?

We are still rolling out our system through the companies across the world, so it's going well. We are having no major problems doing this, so it will continue to be done and it will take another few months to finish the whole system.

Chip Dillon, Credit Suisse.

Yes. I had a quick question about the revenue number. You all mentioned that I think, overall, Aptar, the price change was I think up 1% to 2% year-to-year. And I just didn't know, did that include also within that, the resin pass-through that impacted Closures?

Yes, that's correct. I mean, rough numbers, as Steve said, 7% was the impact directly on the Closures. So Closures is roughly about 25% of the overall consolidated sales and that's how we get to the 1% to 2% number.

Which would imply that pricing everywhere else is pretty flat?

Yes, I think that's a safe assumption.

Okay, thank you.

George Staphos.

When we look at the balance sheet, and it's something we've talked about in the past, by our math and given your past commentary, you have the ability to add easily $400 million to $500 million of leverage, which would only be one turn of EBITDA relative to the results you're currently posting, let alone the EBITDA you'd be posting presuming you found an acquisition that was sizable. Currently, are you looking at any acquisitions that are in that range?

We look -- again, we're not going to comment specifically, but we'll look at -- we've looked at and we'll continue to look at transactions really with all kinds of different potential values, which -- and some will be at those levels. So again, we're not going to comment on the specifics, but there are transactions that are out there that would be in those levels.

But Steve, I guess, the follow-on would be, if you have a 4% net debt to capital, even in a year where you're ramping Capex, you're generating lots of free cash flow. And it sounds like the maximum size of an acquisition that you might look at would be in that range.

What else would prevent you -- which would then suggest you have lots of availability to do whatever you'd like to do from a capital structure standpoint -- why not accelerate share repurchases? And again, we appreciate the start -- the 600,000 shares this past quarter and the increase in the dividend.

I'm not saying that -- by the way, the top we would look at would be the $400 million to $500 million; there could be other transactions. You asked if there's anything available in that size. There are transactions that we see of size and even, to some degree, even larger than that.

So I guess at this point, it's an area that the Board looks at. We felt that with the increasing of dividends in the quarter and, frankly, increasing our share repurchase back up to the 600,000 shares and with the availability of potential transactions, the Board felt that the balance sheet, where it's at, it's better to keep that flexibility if we have a potential opportunity coming up in the second half of this year or early 2011.

We are also investing in markets which are growing, like food and beverage. We have put some money into the capital expenditure for these markets. This is basically internal growth also.

Guys, I appreciate that and clearly, it's paying off. I'm just -- I would just suggest that you probably have even more availability to do more. But in any event, it's a good problem to have.

I guess the last question would be, can you technically be in the market right now buying back stock? I'm not asking whether you are, but could you be in the market today or the next couple of days buying back stock? Thanks.

Yes. Again, what we have as a blackout period that basically goes from roughly 30 days prior to our earnings release to 24 hours after the earnings release, subject to any special transactions that would prohibit us from being in the market. So other than those, we can be in the market pretty much any time.

Okay. So other than that restriction on special transactions, you could be in right after earnings?

Correct.

Okay, thanks, guys. Good luck in the quarter.

(Operator Instructions). Brian Rafn.

A question for maybe Peter. In the past, you guys have had, on the perfume and cosmetic side, you've had product launches that are global and several million units. In the near-term, we've had much more reduced product cycle launches, in some cases under 1 million units, maybe reduced geographic. Are you still seeing that? Or are you seeing some of those new product launches going back to the old numbers?

I think we are seeing the trends that they are going to the old numbers. There are more worldwide product introductions, new products or worldwide introductions. The smaller numbers were mostly celebrity products, which were a lot of them but smaller numbers now. Our customers seem to go back to using worldwide new products.

Okay. In new product design where Steve has always talked about brand differentiation between Europe and the US -- are you seeing coming out of this economic reflation, are you seeing more launches of new brand image, new brand packaging, packaging differentiation? Or is it just really more volume in established lines?

I think a lot of the new products coming out is restaging of existing products or new packages for existing lines and some new brands. But it's more a restaging.

More of the restaging, okay. Blister packs -- Steve had talked about magazine inserts in advertising, how is that going?

Overall, I guess the business continues to do well for us, particularly on the sampling side. And with the economic improvement, we're seeing more launches coming into that market. So overall, Brian, they're doing well.

Okay. SimpliSqueeze in food and beverage, are you still planning new organic applications?

Consistent with -- we see excellent growth in that market, a lot of the new applications we have are doing very well with the SimpliSqueeze product.

Okay. And then one final one, Steve, Capex, $140 million -- what might maintenance Capex be of that number?

You know, Brian, it's roughly around 50% of that, but for us, maintenance in a lot of cases also is cost-savings improvement, increased capacity, so that's kind of a blended number.

Okay. Superb job, guys, keep it up. Thanks.

I'm showing no further questions in the queue. I will turn the conference back over to Mr. Pfeiffer for his closing comments.

Thank you, Dmitri. I would like to thank everyone for participating in today's call. Thank you very much and goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.